What Do Land Developers Look For?

Columbia, SC · Member since 2019 · 32 posts · 6 votes

I am wholesaling my first residential zoned parcel of land and as a newbie to land wholesaling, what specifically do land developers look for in the land itself for purchasing it? I've done all the research and due diligence for the land and I want to make the developer is getting a profitable portion for it. Any advice/suggestions helps!

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Don Gouge

Johnson City, TN · Member since 2017 · 209 posts · 367 votes

Unless the land is an absolute steal a developer will only buy on option or with the contingency of acquiring all of the necessary zoning and approvals.

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Scott P.
Rental Property Investor · Indiana...mostly · Member since 2019 · 468 posts · 245 votes
7y
I would look for:
1. Is it zoned R1, R2, R3, etc.
2. Is it on an existing street or road?
3. If water, sewer, and natural gas available at the street?
4. If water is not available, how difficult is it to have a well and what is the ground water quality at various depths? Or how difficult and costly is it for the nearest water company to bring water?
5. If sewer is not available, how difficult is it to have sewer ran from the nearest treatment plant, or how difficult is it to install a package plant or what are the soil conditions which leads to what types of septic systems are allowed.
6. In my experience, getting electric service and land line phone is not difficult but that needs to be verified.
7. Also if natural gas is not avail, be sure that propane is.
8. i might consider how difficult it is for state approvals as well as local approvals.
This is all off the top of my head as far as what I've done in the past to develop small areas.
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Don Gouge
Johnson City, TN · Member since 2017 · 209 posts · 367 votes
7y
Unless the land is an absolute steal a developer will only buy on option or with the contingency of acquiring all of the necessary zoning and approvals.
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Nigel Witherspoon
OP
Columbia, SC · Member since 2019 · 32 posts · 6 votes
7y
Scott P
Thank you. I've even done the research on some of those that you mentioned and the land is perfect to build upon. With everything already cleared by local and state. I haven't done the electrical and land line verification yet so I will look into that. Thank you.
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Nigel Witherspoon
OP
Columbia, SC · Member since 2019 · 32 posts · 6 votes
7y
Originally posted by @Don Gouge:

Unless the land is an absolute steal a developer will only buy on option or with the contingency of acquiring all of the necessary zoning and approvals.
I overlooked this. Thank you!
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Charlie John
Investor · Twin Cities, MN · Member since 2015 · 130 posts · 111 votes
7y
@Scott P. thanks for your post! Can you tell us a little more about your experience developing small deals? I am rehabbing houses and flipping now but I constantly think about going after lots that I can subdivide and sell off the existing rehabbed house and then building a spec house on the other piece of the remaining land.
Do you have a particular deal that you could explain how you identified it? Was it easy to go thru the process? Thanks!!!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Charlie John:

@Scott P. thanks for your post! Can you tell us a little more about your experience developing small deals? I am rehabbing houses and flipping now but I constantly think about going after lots that I can subdivide and sell off the existing rehabbed house and then building a spec house on the other piece of the remaining land.
Do you have a particular deal that you could explain how you identified it? Was it easy to go thru the process? Thanks!!!
I am currently working with one of the premier minds in this area IE mining for lots.... and shadow plats.
working on a home study course that will allow those who purchase to jump ahead of competition as in hardly anyone knows how this is really done.. this is a huge money play it beats the ever living stuffing out of buying rental houses that make 100 to 200 a month.. :)
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
AS for what developers look for.
1. if its an infill lot and or single buildable lot we don't look for much just veryify zone utls and if we are builder we know most of this off the top of our head and you somehow beat us to it.
2. if it needs to be developed .. Unless as stated above its a smokin deal.. we wont close until we get all our entitlements.
many times land that you might tie up will have some hair on it someplace and that's the reason a seller would let you take a swing at it in the first place.
when we buy dirt we have to prove who we are to the seller.. otherwise we cant even get into contract.
remember there is tons of land that while some value still does not have much as the development cost exceed the end lot values.
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Nigel Witherspoon
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Columbia, SC · Member since 2019 · 32 posts · 6 votes
7y
@Jay Hinrichs if the lot sits in a well-developed neighborhood and has already been cleared for building and zoning, wouldn't this make the lot valuable to a land developer?
What I am going off of is everything the client told me and doing my due diligence into researching the land itself. Also, should I have an appraiser come take a look at the land since the last appraisal was done in 2017?
The comparable homes around it are increasing at about 2%/year.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Nigel Witherspoon:

@Jay Hinrichs if the lot sits in a well-developed neighborhood and has already been cleared for building and zoning, wouldn't this make the lot valuable to a land developer?
What I am going off of is everything the client told me and doing my due diligence into researching the land itself. Also, should I have an appraiser come take a look at the land since the last appraisal was done in 2017?
The comparable homes around it are increasing at about 2%/year.
sounds like an infill lot not a development lot.. just run it by a good real estate agent for valuation.
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
7y
If it’s a single lot in a developed subdivision, you’re looking for a builder, not a “developer”, to sell it to.
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Scott P.
Rental Property Investor · Indiana...mostly · Member since 2019 · 468 posts · 245 votes
7y
@Charlie John, Thanks for asking. I would say small. About 20 units here, a commercial building there, kind of thing. The thing about me is that I've done things from more than one angle as opposed to a much bigger Player who does only one type of work from only one angle but has a large business doing it all.
At some point I'll be able to put something together to share I believe. I haven't been able to make time yet to even add my photo and fully complete my profile here. For now I'm enjoying using the time I have just to share experience.
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Scott P.
Rental Property Investor · Indiana...mostly · Member since 2019 · 468 posts · 245 votes
7y
You're welcome @Nigel Witherspoon. It's possible I misunderstood your original question.
In my area a "developer" looks for farmland or possibly lots in a city that have a building that would likely be demolished or perhaps used to have a building and are now empty. A "builder" on the other hand, comes to land or lots that are already "developed" and then builds a house, or an apartment building, or a commercial building, etc.
If you think maybe I misunderstood jut let me know and I'll answer again.
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Nigel Witherspoon
OP
Columbia, SC · Member since 2019 · 32 posts · 6 votes
7y
@Scott P. Thank you for that. I’m currently searching for builders since the last comment!
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Scott P.
Rental Property Investor · Indiana...mostly · Member since 2019 · 468 posts · 245 votes
7y
@Nigel Witherspoon said above in Item#1 with this thought.
In my area not many Builders buy lots right now. The lots tend to be bought by individuals like you and I. Those folks then hire a Builder to build on the lot.
Normally the seller of the lot would provide information about utility availability and what easements there are for drainage etc. I believe you would need all that info to show to any prospective Buyer.
Good luck!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Scott P.:

@Nigel Witherspoon. I think i agree. It sounds like you have a lot in an existing subdivision. Just check to see that all the standard utilities a house would need are available. If you'd like to be thorough, find out from each utility company what it costs to connect to their utility. In my area it's usually free to connect to electric. It could cost $1000-$3000 to connect to sewer. If there is no sewer, it could cost $3000-$12000 for a septic system. It's usually free to connect to natural gas; however, a plumber charges something, maybe $300 to do part of the work. It may cost a few hundred to connect to water and have a meter set and then a plumber type water contractor charges to run a water line to the house. The cost depends on the length of the line maybe $500. The point of all this is that the lower these costs are, the more valuable the lot is to a Builder.
Also it is worth more if the building department is easy to work with and the building permit fees are low. You could be thorough by checking w/the bldg dept about the cost.
In my experience, most people with lots to sell don't check any of these things. The Builder who may want to buy the lot knows better than us what he wants to check and how much things cost. I'm basically repeating what @Jay Hinrichs said above in Item#1 with this thought.
In my area not many Builders buy lots right now. The lots tend to be bought by individuals like you and I. Those folks then hire a Builder to build on the lot.
Normally the seller of the lot would provide information about utility availability and what easements there are for drainage etc. I believe you would need all that info to show to any prospective Buyer.
Good luck!
when builders are not buying lots that means there is no Spec market.. only build to suit .. out our way we pay 30 to 70k in the form of system development charges then you have to pay to run the services.. LOL.. we cant get going vertical for less than 100k a lot bare minimum. usually closer to 150 to 200k.. that's why we have no affordable housing in the SFR range.
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Nigel Witherspoon
OP
Columbia, SC · Member since 2019 · 32 posts · 6 votes
7y
@Scott P. After doing more extensive research like you mentioned, the fees to build in the area where its at are low, including sewer, natural gas, zoning, permits, etc. Another concern I have is the price for the lot. If the comp value of the surrounding land is $2K under what the seller is asking, will this not appeal to builders?
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Nigel Witherspoon
OP
Columbia, SC · Member since 2019 · 32 posts · 6 votes
7y
Originally posted by @Jay Hinrichs:

Originally posted by @Scott P.:
@Nigel Witherspoon. I think i agree. It sounds like you have a lot in an existing subdivision. Just check to see that all the standard utilities a house would need are available. If you'd like to be thorough, find out from each utility company what it costs to connect to their utility. In my area it's usually free to connect to electric. It could cost $1000-$3000 to connect to sewer. If there is no sewer, it could cost $3000-$12000 for a septic system. It's usually free to connect to natural gas; however, a plumber charges something, maybe $300 to do part of the work. It may cost a few hundred to connect to water and have a meter set and then a plumber type water contractor charges to run a water line to the house. The cost depends on the length of the line maybe $500. The point of all this is that the lower these costs are, the more valuable the lot is to a Builder.
Also it is worth more if the building department is easy to work with and the building permit fees are low. You could be thorough by checking w/the bldg dept about the cost.
In my experience, most people with lots to sell don't check any of these things. The Builder who may want to buy the lot knows better than us what he wants to check and how much things cost. I'm basically repeating what @Jay Hinrichs said above in Item#1 with this thought.
In my area not many Builders buy lots right now. The lots tend to be bought by individuals like you and I. Those folks then hire a Builder to build on the lot.
Normally the seller of the lot would provide information about utility availability and what easements there are for drainage etc. I believe you would need all that info to show to any prospective Buyer.
Good luck!
when builders are not buying lots that means there is no Spec market.. only build to suit .. out our way we pay 30 to 70k in the form of system development charges then you have to pay to run the services.. LOL.. we cant get going vertical for less than 100k a lot bare minimum. usually closer to 150 to 200k.. that's why we have no affordable housing in the SFR range.
This infill is located in a developed subdivsion. So a build to suit is primarily more of what the buyer would get out of it? Since the subdivision is already developed.
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Scott P.
Rental Property Investor · Indiana...mostly · Member since 2019 · 468 posts · 245 votes
7y
@Nigel Witherspoon Build to Suit sounds correct for my area for a lot in a subdivision that is already developed. In my area, I would think an individual might buy the lot at retail to hire a Builder to build their own home or a Builder might buy it as 50%-75% off retail in order to build a house on "speculation" hoping to sell the lot with the finished home on it.
I'm not sure how it might work in your area though.
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Nigel Witherspoon
OP
Columbia, SC · Member since 2019 · 32 posts · 6 votes
7y
@Scott P. After talking with a few investors in the area, they look closer to 75% off for infills to even profit from the build. So it works the same as well.
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